VISVESVARAYA NATIONAL INSTITUTE OF TECHNOLOGY, NAGPUR

VNIT HUMANITIES DEPARTMENT

HUMAN VALUES ASSIGNMENT

BUSINESS ETHICS AND ITS IMPORTANCE

UNDER THE GUIDANCE OF :

DR. Y. M. DESHPANDE

SUBMITTED BY:

SUSMIT M. NIMJE

BT13CME073
 IMPORTANCE OF BUSINESS VALUES

INTRODUCTION

The term Business Ethics refers to the system of moral principles and rules of the
conduct applied to business. Business being a social organ shall not be conducted in a
way detrimental to the interests of the society and the business sector itself. Every
profession or group frames certain dos and donts for its members. The members are
given a standard in which they are supposed to operate. These standards are
influenced by the prevailing economic and social situations. The codes of conduct are
periodically reviewed to suit the changing circumstances.
Business Ethics is generally coming to know what is right or wrong in the work place
and doing what is right. This is in regard to effects of products/services and in
relationship with the stake holders. Cater Mcnamara
Business ethics in short can be defined as the systematic study of ethical matters
pertaining to the business, industry or related activities, institutions and beliefs.
Business ethics is the systematic handling of values in business and industry. John
Donaldson (economist).

Business ethics can be denoted as written or unwritten codes of morals, values, and
principles that governs actions and decisions in a company. In the business world,
standards are set for determining good and bad behavior and decision-making.
Business ethics is a broad topic, covering everything from corporate governance to
corporate social responsibility.

Business ethics should take into consideration the following factors:

1. A business should aim to have fair dealing with everyone dealing with it.
2. Ethics should be fixed for everyone working in the organisation at any level and their
implementation should be linked with reward- punishment system.
3. Any violation of ethics should be detected at the earliest and remedial measures
taken immediately.
4. Business ethics should be based on broad guidelines of what should be done and
what should be avoided.
5. The ethics should be based on the perception of what is right.
SOURCES OF BUSINESS ETHICS :

In every society there are three sources of business ethics -

1. Religion
2. Culture
3. Law.
The HR manager in every organization, thus, has to be well versed with the unique
system of values developed by these three sources.

These sources are discussed as follows:

1. Religion:
Religion is the oldest source of ethical inspiration. There are more than 1, 00,000
religions which exist across the whole world, but all of them are in agreement on the
fundamental principles. Every religion gives an expression of what is wrong and right in
business and other walks of life. The Principle of reciprocity towards ones fellow beings
is found in all the religions. Great religions preach the necessity for an orderly social
system and emphasize upon social responsibility with an objective to contribute to the
general welfare. With these fundamentals, every religion creates its own code of
conduct.

2. Culture:
Culture is the set of important understandings that members of a community share in
common. It consists of a basic set of values, ideas, perceptions, preferences, concept of
morality, code of conduct etc. which creates distinctiveness among human groups.
When we talk about culture we typically refer to the pattern of development reflected in
a societys pattern of knowledge, ideology, values, laws, social norms and day to day
rituals. Culture differs from society to society. Moreover it is passed from generation to
generation. Culture facilitates the generation of commitment to something larger than
ones individual self interest.
Culture encourages the members of the organisation to give priority to organizational
goals over and above their personal interests. Culture also serves as a sense making
and control mechanism that guides and shapes the attitudes and behaviour of people.
Managers have to run an industrial enterprise on the cutting edge of cultural experience.
The tension that their actions create makes the business ethically more complex.
3. Law:
The legal system of any country guides the human behaviour in the society. Whatever,
ethics the law defines are binding on the society. The society expects the business to
abide by the law. Although it is expected that every business should be law abiding,
seldom do the businesses adhere to the rules and regulations. Law breaking in
business is common eg. Tax evasion, hoarding, adulteration, poor quality & high priced
products, environment pollution etc.

TYPES OF BUSINESS ETHICS :

It is really impossible to classify the business ethics into certain definite types. However,
attempts have been made to classify them into certain categories. They are as follows:

1. Personal Responsibilities: This refers to the personal beliefs of an individual. Every

individual has certain firm beliefs on certain matters such as honesty, avoiding criminal
acts, obedience to elders, willing to perform accepted duties, promptly settling the dues
etc.

2. Official Responsibilities: Only persons or human beings occupy positions. A person

who-is occupying a certain position should strictly follow certain norms and other
standards set for that official capacity.

3. Personal Loyalties: These include loyalties of a subordinate to his superior. So long

as the superior is just and honest, the subordinates shall not face any problem.
Sometimes personal loyalties are so strong that ethical standards may not be applied
when acting towards a particular individual. Personal loyalties include the loyalties of a
subordinate to his superior and superior's loyalty towards his subordinate.

4. Corporate Responsibilities: Corporations, as separate legal entities, have certain

moral responsibilities. The responsibilities may not be identical with the personal moral
codes of the managers who run the company. These responsibilities may be internal or
external.

5. Organizational Loyalties: Many people develop a deep sense of loyalty towards the
organization as an entity that goes beyond their personal interest. This loyalty has
arisen out of love and affection. This factor can be stimulated effectively. If so, the
employees will work hard and help the enterprise in achieving its objectives. Their
loyalties to their organization are so strong that they even neglect their own self interest
for the sake of the organization.

6. Economic Responsibilities: There is one and only one social responsibility of

business to use its resources efficiently and engage in activities designed to increase
profits without deception or fraud". Therefore, every business must contribute to the
general welfare of the society by making efficient and economical use of resource at
their command. This type of morality guides individual action towards economy in the
use of resources put at his disposal.

7. Technical Morality: In any country, the state of technology plays an important role in
determining what products and services will be produced. Technological environment
influences organizations in terms of investment in technology, consistent application of
technology and the effects of technology. A manager having technical morality will
refuse to compromise with quality. Professional people should adhere to certain ethical
standards established by competent bodies or persons or by customs. The Code of
Conduct set for them by the concerned institutions governing the profession binds
lawyers, chartered accountants, doctors etc.

8. Legal Responsibility: Legal environment provides the framework within which the
business is to function. The viability of business depends upon the ability with which a
business can meet the challenges arising out of the legal framework.It refers to the
responsibility imposed by law. What are all illegal are supposed to be unethical also.
IMPORTANCE OF BUSINESS ETHICS :

1. Corresponds to Basic Human Needs:

The basic need of every human being is that they want to be a part of the organisation
which they can respect and be proud of, because they perceive it to be ethical.
Everybody likes to be associated with an organisation which the society respects as a
honest and socially responsible organisation. The HR managers have to fulfill this basic
need of the employees as well as their own basic need that they want to direct an
ethical organisation. The basic needs of the employees as well as the managers compel
the organizations to be ethically oriented.

2. Credibility in the Public:

Ethical values of an organisation create credibility in the public eye. People will like to
buy the product of a company if they believe that the company is honest and is offering
value for money. The public issues of such companies are bound to be a success.
Because of this reason only the cola companies are spending huge sums of money on
the advertisements now-a-days to convince the public that their products are safe and
free from pesticides of any kind.

Business ethics are needed to improve the customers' confidence about the quality,
quantity, price, etc. of the products. The customers have more trust and confidence in
the businessmen who follow ethical rules. They feel that such businessmen will not
cheat them.

3. Credibility with the Employees:

When employees are convinced of the ethical values of the organisation they are
working for, they hold the organisation in high esteem. It creates common goals, values
and language. The HR manager will have credibility with the employees just because
the organisation has creditability in the eyes of the public. Perceived social uprightness
and moral values can win the employees more than any other incentive plans.

4. Better Decision Making:

Respect for ethics will force a management to take various economic, social and ethical
aspects into consideration while taking the decisions. Decision making will be better if
the decisions are in the interest of the public, employees and companys own long term
good.
5. Profitability:
Being ethical does not mean not making any profits. Every organisation has a
responsibility towards itself also i.e., to earn profits. Ethical companies are bound to be
successful and more profitable in the long run though in the short run they can lose
money.

6.Stop business malpractices :

Some unscrupulous businessmen do business malpractices by indulging in unfair trade

practices like black-marketing, artificial high pricing, adulteration, cheating in weights
and measures, selling of duplicate and harmful products, hoarding, etc.

Today, the consumers are aware of their rights. They take actions against those
businessmen who indulge in bad business practices. They boycott poor quality, harmful,
high-priced and duplicate goods. So, the only way to survive is to be honest and fair.

7.Survival of business :

Business ethics are mandatory for the survival of business. The businessmen who do
not follow it will have short-term success, but they will fail in the long run. This is
because they can cheat a consumer only once. After that, the consumer will not buy
goods from that businessman. He will also tell others not to buy from that businessman.
So this will defame his image and provoke a negative publicity. This will result in failure
of the business. Therefore, if the businessmen do not follow ethical rules, he will fail in
the market. So, it is always better to follow appropriate code of conduct to survive in the
market.

8.Safeguarding consumers' rights :

The consumer has many rights such as right to health and safety, right to be informed,
right to choose, right to be heard, right to redress, etc. But many businessmen do not
respect and protect these rights. Business ethics are must to safeguard these rights of
the consumers.

9.Protecting employees and shareholders :

Business ethics are required to protect the interest of employees, shareholders,

competitors, dealers, suppliers, etc. It protects them from exploitation through unfair
trade practices.
 10.Smooth functioning :

If the business follows all the business ethics, then the employees, shareholders,
consumers, dealers and suppliers will all be happy. So they will give full cooperation to
the business. This will result in smooth functioning of the business. So, the business will
grow, expand and diversify easily and quickly. It will have more sales and more profits.

11.Consumer satisfaction :

Today, the consumer is the king of the market. Any business simply cannot survive
without the consumers. Therefore, the main aim or objective of business is consumer
satisfaction. If the consumer is not satisfied, then there will be no sales and thus no
profits too. Consumer will be satisfied only if the business follows all the business
ethics, and hence are highly needed.

12.Healthy competition :

The business must use business ethics while dealing with the competitors. They must
have healthy competition with the competitors. They must not do cut-throat competition.
Similarly, they must give equal opportunities to small-scale business. They must avoid
monopoly. This is because a monopoly is harmful to the consumers.

PERSONAL COMMENTS :

Businesses not following any kind of ethical code or carrying out their social
responsibility leads to wider consequences.
The natural world can be affected by a lack of Business Ethics. For example, a
business which does not show due care for where it disposes its waste products, or fails
to take a long term view when buying up land for development, or neglects its
obligations towards minimizing its carbon footprint and driving progress towards green
renewable energy, is damaging the world in which every human being lives, and
damaging the future prospects of all companies.
Developing countries can be damaged by poor business ethics. Large companies
neglecting to set a good example of Corporate Social Responsibility (CSR) actively
hinder the progression of all business in developing countries.
Businesses taking advantage of cheap labour or dominating local markets from an
unfair position may make a profit in the short term, however in the long term this is a
false economy.
The world is largely held back by companies operating without business ethics.
 This also applies to other companies which may work together. A robust code of
Business Ethics should forbid dealing with a company whose commitment to CSR is
lesser, so as to avoid condoning or appearing to condone poor ethical behaviour. Such
manner of boycotting unethical companies, individuals and companies can positively
influence the whole business world.
When an unethical company finds itself with no customers, no investors and no
suppliers, it will be forced to change its ways or go out of business; constant striving for
better and more ethical dealings in this way produces a cycle of continuous
improvement.
Where individuals, such as fishermen, cannot afford to be ethical about some of their
work for example overfishing or taking due care for coral or other species and are
unable to take into account the bigger picture during their day to day operation, it falls to
the government or other officials to introduce laws and regulations and enforce them.
Without this long view approach, sustainability will fail and future generations will suffer.

CONCLUSION :

Business ethics can be denoted as written or unwritten codes of morals, values, and
principles that governs actions and decisions in a company. In the business world,
standards are set for determining good and bad behavior and decision-making.
Business ethics is a broad topic, covering everything from corporate governance to
corporate social responsibility.

Business ethics is a subjective term. However, it is easy to identify

unethical business practices in an organization, such as employing child labor, taking
bribes, or illegally using copyrighted materials. When ethical guidelines are followed,
trust is developed between the employees and management, as well as the public and
the corporation. Thus, business ethics leads to a more productive workplace.
Clearly it is necessary to deploy rather more than gut feel in examining a businesss
position in regard to business ethics

Ethical practices can go beyond just making sure your business does not
have a negative impact on people and the environment. It can also mean dedicating a
portion of your companys time and resources to actively improving these areas for
example investing in building in developing countries, investing in community programs,
lobbying for political change, encouraging employees to donate their time and expertise
to other projects (at your companys expense) and so on.

This level of Business ethics is the most commendable and should be

something all companies strive for in this day and age, so that higher standards can be
achieved for all in the future.
REFERENCES :

www.managementstudyguide.com
www.applied-corporate-governance.com
www.kalyan-city.blogspot.in
www.businesscasestudies.co.uk
www.investopedia.com
www.yourarticlelibrary.com
blogs.accaglobal.com
http://accountlearning.com